Can pay transparency laws close the pay gap?

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“The 360” shows you diverse perspectives on the major stories and debates of the day.

What is happening

Anyone interviewed for a job knows that salary discussions can be one of the most stressful parts of the hiring process. Asking too much could hurt your chances of getting the job, but asking too little could mean being locked into less pay than you could earn.

This uncertainty is not just a problem for individual job seekers. Research suggests this helps — since women and people of color are and receive higher salaries when hired and throughout their careers.

In an effort to combat this problem, new laws have been passed aimed at disambiguating wage negotiations. Last year, Colorado enacted a law that requires employers to share a pay scale for all job postings. California and Washington State will do the same starting in January. New York City will mandate wage rates in job postings starting next month. A bill that would apply similar rules across New York state has been approved by the state legislature and is awaiting the governor’s signature.

These laws are the most important legal steps in a broader trend in which workers, companies and lawmakers are reconsidering the longstanding taboo against open discussions about salary with co-workers and friends. In a recent survey by business analytics firm Visier, 79% of workers said they . This is especially true for young employees. Nearly 90% of Gen Zers said they were comfortable discussing money at work, compared to just 53% of baby boomers.

Why there is debate

Pay transparency mandates are very new in the United States, so there isn’t enough data to definitively judge how much they affect gender and racial wage gaps on a large scale.

But policy advocates say there are small-scale lawsuits and laws in other countries to show that forcing companies to be open on pay scales for women and people of color is catching up with their white male peers. . Proponents also argue that pay transparency helps all workers, including white men, by denying employers a tool they use to suppress earnings for all of their employees. They say disclosing wages lets workers know where they stand and gives them the information they need to advocate for themselves and their co-workers to get paid what they’re worth. As proof, they point to smaller pay gaps in and , where salaries are often more transparent.

Many, but not all, generally argue that this makes it impossible and could seriously damage the morale of workers who earn less than their colleagues. There is also evidence from Europe, where several countries require salary ranges in job advertisements, that pay transparency reduces the pay gap – but only because . Another study found that disclosing pay rates leads women rather than with their higher paid male colleagues.

Others argue that whatever benefits pay transparency laws might have, they are far from sufficient to overcome the complex web of societal forces that create pay gaps.

And after

Experts say it may only take a handful of states requiring pay transparency for the practice to become the norm nationwide, even in places where it isn’t mandated. Microsoft, for example, recently announced that it will include pay scales in all of its US-based job postings starting next year, when the company’s home state of Washington begins. to demand pay transparency for local positions.

Perspectives

supporters

Salary disclosure mandates aren’t a panacea, but they make a difference

“I’m not saying that pay transparency is entirely without problems, mind you. There are pros and cons, just like everything else in life. While transparency is good, it’s always possible to have a little too much of a good thing. … Nevertheless, I would rather deal with too much information than the current information asymmetry that exists between companies and candidates. —Arwa Mahdawi,

Transparency helps solidify the collective power of workers

“Salary transparency in job postings will encourage people to talk more openly about their own compensation and allow job seekers to get more information about their market value. At the same time, companies will have to do more work to update pay policies and answer employee questions – all amid ongoing staff shortages, contentious return-to-work policies and a rise in job losses. unionization efforts. — King of Hope,

Openness is the key to building a fair economy for the future

“As we continue to live and work through this crisis, the stakes have never been higher for workers – especially women of color who have suffered the most severe financial impact – to be paid what they are worth, plus taxes. Pay transparency is a start. — Madeleine Granato

Workers shouldn’t have to endure the high-stakes guessing game of wage negotiations

“Address the salary issue too soon, and an employer might view it negatively. Avoid the question or salary negotiations altogether and you risk being underpaid. It is a delicate song and dance. But a new wave of laws, which require private companies to shell out the details of wages, could end this rigamarole once and for all. —Adam Hardy,

Pay transparency would create lifelong benefits for young workers

“If the wage squabble has no age, it is particularly costly for workers who are starting out. …While older workers have bigger and broader networks – and therefore may be able to research salary options by asking around – younger workers without those contacts are more likely to work in the dark. This is especially true for those who are the first in their families to go to college, or whose parents aren’t great networkers themselves, or in families where talking about money is taboo. —Sarah Green Carmichael,

Companies also benefit from pay transparency

“Hiding the ball is also inefficient; it wastes everyone’s time if the salary is a non-starter. How does being shy about wages benefit anyone, including the economy as a whole? So much time and effort goes into writing applications, reviewing applications, selecting candidates and conducting interviews. It’s a poor use of company time and deeply unfair to candidates who spend time applying for jobs that may not meet their needs. —Terri Gerstein

Skeptics

Closing the wage gap by lowering men’s wages is not the right solution

“The jury is still out on how effective these measures are in practice. Although research shows they narrow the pay gap, rather than raise women’s pay to the level of men’s, this happens primarily by lowering the relative wages of men and reducing productivity, which in turn could cause employers to back down.—Paola Tamma,

High-performing workers stand to lose

“Equality should not be confused with equity. A fair wage implies that individuals who are more productive and contribute more to the organization receive better compensation. Unfair compensation often leads to employee dissatisfaction and turnover, especially among high performers. —Kun Huo

The emotional impact on workers is underestimated

“Economists tend to have this general intuition that transparency is good because when more information becomes available, people can make better choices. The point I’m trying to make is that humans aren’t maximizing algorithms, but social animals that are prone to social comparisons. When you say publicly that someone earns little money, you risk hurting them. These are unintended consequences of transparency that we should consider when designing our transparency policies. — Ricardo Perez-Truglia, Economist, at

It may be impossible for some companies to meet workers’ wage demands

“There’s this danger that once you open that Pandora’s box and overpay one person, the demands to create equity and get everyone up are more than a slippery slope – it’s a cliff. If an employee really thinks they can get paid better elsewhere, well, sometimes you just have to pack them lunch and show them the door. —Neil Senturia

This incentivizes companies to cut pay for all employees

“In fact, this single salary has the effect of really strengthening the bargaining position of the employer. And the reason for that intuitively is that when there’s a price, and an employee wants to ask for a raise, the employer can now very credibly say, Well, if I give you a raise, that means that I probably have to give everyone else a raise too. … This means that the employer has every incentive to negotiate aggressively. — Zoe Cullen, Labor Market Researcher,

Creating a truly fair economy will take more than pay transparency

“Closing the pay gap would be a significant step forward for equality in the United States, affecting everything from Americans’ quality of life to how they view themselves. But while pay transparency is a much-needed improvement, much more is needed to truly create balance for all Americans. —Rani Molla,

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Photo illustration: Yahoo News; photos: Getty Images

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